Shared ownership: communities are ready, but they need developers at the table
Across Scotland, communities have huge aspirations for community energy. Backed by dedicated staff and volunteers, communities are putting enormous amounts of time and energy getting projects off the ground and engaging with commercial developers about shared ownership opportunities.
There is also a strong network of intermediary organisations working to support them, providing funding, expert advice and practical support, including Local Energy Scotland through CARES, DTAS, and Community Energy Scotland.
Despite this support and community ambition community owned energy only represents around 1% and Shared Ownership only 0.2% of onshore wind capacity in Scotland. In many areas the electricity grid is so constrained that shared ownership is the only viable option for community organisations to take a stake in the energy system. And still, for many communities, progressing shared ownership continues to feel like an uphill battle.
Research done by the Centre for Local Economies (CLES) on who benefits financially from Scotland’s onshore wind shows a shocking wealth leakage in this sector. CLES found that 90% of profit generated by commercial windfarms leaves Scottish communities and is paid as dividends to corporate shareholders. Continuing with this business-as-usual approach, with little to no incentives or mandates to change ownership structures, will mean a continued wealth drain on our communities.
What we’re hearing from communities:
At our recent Shared Ownership Peer Learning Group, which had more than 60 organisations signed up, we heard directly from communities about their experiences of trying to make shared ownership happen.
One of the strongest messages was that capable, experienced community organisations can spend years negotiating, access publicly funded professional legal and financial support and still end up without a viable shared ownership offer.
Developer engagement came through as one of the most consistent barriers.
” We’re talking to a number of developers (about shared ownership), but the impression we get is that they’re resistant to shared ownership because they think it’s a faff. So either it has to be mandated, or there needs to be a financial incentive for those developers to engage. What we need is something to really hold their feet to the fire to encourage them to engage. “
Several communities described developers as supportive of shared ownership in principle but said this did not always translate into meaningful offers or negotiations in practice. Communities also questioned whether the current voluntary approach gives them enough leverage to progress these conversations.
Timing is part of this challenge. Shared ownership opportunities can come too late in the development process. Buying into a project later can also mean doing so at a much higher value than if the community had been involved earlier. However, buying in at an earlier stage of the project means communities may have to bear the risk of higher-than-expected construction costs.
There were also questions about what constitutes a meaningful shared ownership offer. An opportunity existing on paper does not necessarily mean that the terms make it possible or financially viable for a community to take it up.
“This example is a repowering (on Forestry and Land Scotland land). On paper, there’s a very nice offer, 1% free, up to 5% at cost, and up to 49 percent to be negotiated. ….. So, you start trying to negotiate that and they (the developer) say you can have up to the 49%, but only after it’s been built and at market value.
Let’s just say… The wind farm costs 10 million pounds to build. Now, they are going to offer you 50% at market value. A market value might be 20 million. So the community pay for their half at 10 million, and that’s paid for the developers 10 million pounds, which they’ve used to build the wind farm. So the community has actually paid for it (the windfarm). And of course, it’s a very poor deal for the community because they’re not in from the start.
This is on Forestry and Land Scotland land. It is government land. And the requirement in the tender is that the developer makes a meaningful offer to the community. But that’s it, it’s not defined, it’s not followed up, it’s not controlled in any way.
What is a meaningful offer?”
Communities also need the right conditions to invest
Access to affordable finance remains another major barrier. For large renewable developments, even a relatively small stake can require millions of pounds of investment, which can feel overwhelming or simply impossible for a community organisation to pursue.
We hope the recent funding announcements for CARES and the wider Great British Energy People’s Power programme can help unlock some of this gap.
Funding timescales also need to reflect the reality of developing shared ownership projects. These projects can take years. Communities need resource funding to build relationships, negotiate, develop governance and progress an investment, rather than short bursts of funding that don’t match the development timeline.
But the message we heard was clear: community capacity is not the whole story.
” When I hear about building flexibility in for communities and more capacity for communities, I think that’s great. But the reality is that’s not where the problem lies. That is not why shared ownership isn’t being taken up and we have to look at the fact that the developers and the borrowing are the issues, so how do we tackle that?”
Communities are ambitious, they are accessing support, they are developing their knowledge and expertise. Staff and volunteers are putting in the hours, and they are actively trying to engage, but they need willing partners on the other side of the table.
Developers and the public sector have an important role to play:
” My message would be to UK government, Scottish government, GB Energy, they need to robustly challenge developers to actually practise what they preach in saying that they are highly supportive of shared ownership. Whether that is mandating shared ownership, which would certainly help. But in the interim, because it takes time for legislation to be enacted, there needs to be a robust challenge to developers, because in my experience, they are just not delivering in terms of meaningful discussions with community groups.”
While shared ownership remains voluntary, making it work is going to require meaningful engagement and goodwill from developers. There are commercial developers who can see the value of this.
A community stake in a renewable energy project can create a long-term relationship between the development and the place hosting it. Communities become invested in maintaining their ownership stake and deriving a long-term benefit from the project.
So our call to developers is simple: engage with communities early, meaningfully and with a genuine intention to explore what shared ownership could look like and make a credible offer.
For any shared ownership or community energy support please get in touch with our Democratic Finance team at: info@democraticfinance.scot